Rogers Communications, Shaw strike wireless spectrum deal

Rogers Communications Inc. said late Monday it has acquired spectrum and a cable division in Southern Ontario from Shaw Communications Inc. for about $700-million.

The deal strengthens the respective positions of the wireless giant and also that of Western Canadian cable power Shaw, which said it will use the cash to accelerate network upgrades and other strategic initiatives as it seeks to fend off intense competition from chief regional competitor Telus Corp.

For Rogers’ part, it is acquiring unused airwave real estate over British Columbia and Alberta as it too competes with Telus and BCE Inc.’s Bell Mobility, as well as smaller operators, for mobile customers. Shaw had little direct use for the spectrum after shifting strategy in late 2011 away from launching its own wireless services.

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In an interview, Nadir Mohamed, chief executive of Rogers, called the spectrum a “great strategic asset” for the country’s largest wireless operator. Rogers agreed to pay $50-million for the option to acquire the airwave licences in August 2014, when an Industry Canada moratorium is lifted.

Rogers, Telus and BCE are prevented from buying any of the so-called “AWS” spectrum that was allocated for new wireless competitors during a 2008 auction by the federal government. Firms like Wind Mobile, Mobilicity and Videotron have entered the $19.1-billion mobile market using the airwaves.

Despite paying $190-million for spectrum, Shaw shifted strategy away from a wireless launch, in part because of its opportunistic $2-billion purchase of Canwest’s television holdings as the latter was going bankrupt in late 2009.

For the Calgary-based company, which is fighting to retain core cable and Internet customers across its footprint in Western Canada, the cash infusion allows for an acceleration of investment in its cable network, which is moving toward end-to-end IP delivery.

Chief executive Brad Shaw said in an interview the deal “opens the door to more products and services,” while enabling the firm to build on a wireline network advantage over Telus.

“We love the Hamilton [cable] asset, we love cable assets but the fact is, our fight is in the West,” the executive said.

Most of the purchase price – around $400-million – is for Mountain Cable, a family-run television, Internet and phone provider in Hamilton, Ont that boasts about 40,000 subscribers.

Shaw outbid Rogers for Mountain in 2009, paying around $300-million at the time.

As part of the deal, Shaw Media, the company’s broadcast arm, acquired from Rogers Media its one-third stake in TVtropolis, a specialty channel Shaw picked up when it acquired the Canwest assets in late 2010.

Discussions on a potential deal started several months back when Shaw decided it wasn’t going to utilize the spectrum and tried to find the best strategic suitors.

For new wireless entrants like Wind and Mobilicity – firms that may have struggled to raise the money needed to purchase the airwaves – the deal is blow to their ambitions of taking meaningful market share from the incumbents. Already constrained for spectrum, each will be hard pressed to offer robust wireless data services without additional airwaves.

Analysts called the deal a win-win for Rogers and Shaw, allowing each to strengthen their position in their core market, which, if the pair ever plan to merge – a regular rumour on Bay Street – benefits both in the long run.